tv Nightly Business Report PBS May 21, 2012 6:30pm-7:00pm PDT
>> this is n. b. r.. >> tom: good evening, i'm tom hudson, susie is off tonight. facebook shares sink on day two of trading as the nasdaq continues taking heat for bungling facebook's debut. the g-8 meeting and nato worries about europe's debt crisis easing a bit. and we begin a week-long look at veterans and hiring. tonight why wall street has a special place for returning soldiers, that and more tonight on n. b. r.. we begin with facebook. as facebook stock sinks below its going public price today, the nasdaq continues catching a lot of heat for a software glitch that delayed some orders when the stock debut on friday. the exchange blames a systems glitch that lasted about a
mill i second for sending out software into a loop. erika miller on the potential fallout for the worlds second largest stock exchange. >> reporter: since its start nasdaq has tried to build a reputation as the most technologically advanced stock exchange, it scored a big victory over the rival new york stock exchange by landing the facebook listing, but now it must defend its ability to handle large offerings. >> going forward the concern is how active will potential issuers of ipo's use nasdaq as their listing company. >> reporter: the other big question now is whether nasdaq's blunder is to blame for facebook's dud of a debut. >> it traded flat on the first day may more be an indication that it was direct -- correctly priced. >> reporter: trading problems on exchanges are relatively rare, although they often get a lot of attention. in march, the third largest stock exchange had a systems
meltdown that led to the embarrassing cancellation of its own ipo. but even under the best circumstances, investors should be wary about new issues. >> these stocks often are overhyped early on and then if they do disappoint they can fall very quickly. >> reporter: nasdaq is changing its ipo procedures to prevent the facebook problem from happening again. the exchange is also setting aside $13 million to cover bad trades related to the trading glitch. erika miller, new york. >> tom: still ahead, success or failure with facebook shares dropping below their offering price as the day races on.
>> tom: what a difference a weekend can make for investors. wall street surged high are today, better than 1% across the boards, stocks coming off their worst week of the year so far this year. last week investors today were reassured by comments from world leaders, they want greece to remain in the euro zone. we'll have more about the g-8 meetings in a moment. for today's closing data with the dow rising s 35 points, the nasdaq added 68 despite heavy selling of facebook shares. the s&p 500 added 20. jim awad is managing director at zephyr management. is the spring swoon over for stocks? >> no, i don't think so. i think that the basic problems that drove the market down remain, which are the worries in europe, the possibility of an accident there, and a freezeup in the financial markets. the worry about how bad the
slowdown will be in china, the worry about the fiscal cliff that we are going to face at the end of the year. and then of course the issue with the financial stocks with the j.p. morgan issue, they all are sti out there and i think the market will react to incoming news and data. but all of those could give you a surprise on the down side. >> tom: have we seen this before? in other words last spring, greece was in the headlines, italy was in the headlines, portugal. china was slowing down. we had the debt ceiling debate coming up in the summertime, and of course we had the housing slowdown continuing to put pressure on the financials. so in other words, another deja vu for investors? >> yes, it's very similar to last year. two things are better. first they have injected a lot of liquidity into the banking system in europe. now they have to implement the structural changes, but the liquidity is there. secondly you have to say that the recovery in the united states at this point is a little stronger, a little
older and a little more durable than it was a year ago. >> tom: i want to ask you about technology, we saw tech stocks take the lead today to some degree, facebook shares obviously have been weighing awe little bit on technology over the past couple sessions, but apple was back in the drivers seat today. do you like technology moving forward? >> technology moves the world. it helps when things are tough by lowering costs, it helps improve productivity and as countries and people get richer in the emerging markets they use more, so yes the world and the stock market doesn't have the future unless technology works. >> tom: you mentioned consumers. what about consumers in the shape of that area in the market, especially as energy price, moving lower? >> yes. i particularly like consumer nondurables because to the extent that any of the problems in the world develop, people still are going to use toothpaste and other, and beverages and other nondurables, and also they do get helped with the lower energy prices, people have lower, more discretionary
income, disposable income. and the emerging markets where you have the story of an emerging middle class, those people will be using more and more of those products over time. >> tom: one of those is growth, tech not obviously, consumer staples more defensive and we have seen investors continue to be attracted toward the defensive area, especially the fixed income, loads of money going into the bond market pushing yields and government bonds down to historic levels, below 2% for the 10-year benchmark usiou. is that a place to park money? >> no. i would not, it's not a good return on your money if we live in a normal world. if 1.7% turns out to be a good investment alternative, then the world will be a lot worse than we now it today. what i would say to people is don fight it, it's the result of huge amounts of sovereign money looking for a safe place to invest when the euro is under stress. for those who are interested in fixed income, if you believe the financial companies are good for the money, you can earn 3 to 500
bases points more than treasurys for the same maturity and good financial holding company stocks. >> tom: 3 to 5% more on the interest. do you own positions in the etf's we mentioned? >> no, i do not. >> tom: jim awad, with zephyr management. >> thank you. >> tom: the nato summit in chicago is history tonight. president obama and world leaders agreed to hand over control of afghanistan to afghan security forces next year. over the weekend g-8 leaders came up short though on a plan to help solve europe's debt crisis. diane eastabrook has details.
>> reporter: group of eight leaders call forward measures to boost growth and lower debt in europe but offered no details on how to do it. they are leaving that up to the individual countrys to figure out, and that could be a challenge. european leaders signaled today there's still no consensus among them on how to solve the debt crisis. the clock is ticking for investors. they fear turmoil in greece could spread through the euro zone. french president hollande favors joinly issued bonds to favor economic growth. germany doesn't like that idea fearing the bonds could raise borrowing costs and discourage troubled countrys from getting their finances in order. leaders of the 27 euro zone countries meet in brussels on wednesday for an informal meeting. a summit follows at the end of june. diane eastabrook, nbr, chicago. >> tom: guido schulz is the global head of strategic management at afex. so the group of eight leaders say they want greece to stay in the euro zone, but are
banks preparing even quietly for greece's possible exit from the europe currency? >> definitely. there are definite signs for the major banks preparing for a exit of greece from the euro zone. there are many closed door meetings going on currently, the ecb has had meetings to such regard, and the major players on the global banking landscape have had talks, can you bet on that, absolutely. >> tom: what about the threat to u.s. banks if greece should leave the monetary union, is that a big risk for u.s. investors and banks? >> i definitely would say there is a chance for knock on effects, a cap tat flight out of european institutions could also have knock on effects for american banks as such. it is probably quite prudent to keep in mind that the american banking crisis
happened not so long ago, and investor confidence is still somewhat shaky. so a collapse of the european banking system would definitely also affect the american banking system. >> tom: we seem to have seen a big shift over the past year, a year ago it was essentially all the possible effort was being made to keep greece within the euro. now we're beginning to see some significant cracks. is that a big impact for u.s. businesses with european business? >> i would definitely say it has a significant impact on u.s. businesses in terms of how they look at their exposure to the euro, how they look at their risk management strategy. however, the troubles in greece are not news, they're somewhat discounted, many businesses have prepared already. and as such a euro exit would not necessarily be a surprise at this point in time to major corporations. >> tom: maybe not a surprise to the corporations, but what about the impact in the
currency markets and the capital markets overall? i got to think it would be a shock to the system. >> i think would it be a shock to the system, yes, at least on a short-term basis. but it greatly depends on how the european union reacts on such an exit. if there would be a quick move to a truly unified fiscal policy, and truly unified controls, then that might avert a further decline of the euro's value and only make such an impact short-term rather than long-term. >> tom: that of course has been one of the achilles hooel here, no pun intended, which is the lack of fiscal control in the european union. is the dollar the sole winner if greece leaves the euro? >> the dollar, again from a short-term perspective, definitely stands to benefit from that, but i think we are also going to see flows to other safe haven currencys
such as the swiss franc and we could also see more investment in emerging markets outside the euro zone. >> tom: some cracks around greece's permanence with the euro here continue to build. guido schulz, with afex. >> tom: another high profile insider trading trial getting under way today in manhattan. former goldman sachs board member roger -- raj gupta is charged with conspiracy and five counts of securities fraud. the charges stem from conversations between gupta and convicted hedge fund manager raj ran rat nam. it centers on one call in
particular. it has raj rat man asking about rumors goldman sachs could buy a commercial bank. if convicted gupta faces up to 25 years in prison. meantime another regulator is digging deeper into j.p. morgan's recent $2 billion trading loss. the trading commission says its investigation focuses on credit derivatives traded by the bank's chief investment office. in light of that loss, j.p. morgan today suspended plans to buy back as much as $15 billion worth of its own stock. still, the c.e.o. jamie dimon said the company will continue to pay a dividend to shareholders. in our market focus after losing the longest losing streak in years, the major industries were able to find a higher ground, climbing more than 1%. broad based buying going on, took about 30 minutes for the s&p 500 to find a solid direction, when it did prices rose marking the best session so far this month, up by more than 1.5% for the s&p. the buying comes after the index fell to its lowest level
since mid january, giving up most of those first quarter gains. all but the 10 major stock sectors were up or unchanged. the biggest gains seen in materials, up 3%, technology up more than 2.5% and in the industrial space up more than 2%. chin appears leader helps spark interest in the material sector today. over the weekend the chinese premiere spoke about working to avoid an economic slow down in china. that moved metal and grain prices, that helped move stocks involved in growing and mining those items. cf industries jumped almost 6%. iron ror producer cliffs natural and allegheny technology rebounded more than 5% each. with competitor j.p. morgan under pressure for its trading loss now suspending the stock buyback plan as we just said, bank of america today said it's, quote, very comfortable, end quote, with its investment portfolio. the ticker symbol here, that
did not translate into a higher share price. the bank's c.e.o. made a comment at an investor conference today. about leading the dow, the biggest percentage gainer boeing up almost 4%, investment firm argus upgraded out view of the stock pointing to improving demand for commercial flights and older aircraft being replaced by more energy efficient planes. apple shares were on the mend today. the stock has had some pretty good trouble after rallying over $600 per share last month. we've seen it move lower since. up almost 6% today though in a move that helped the play on the tech sector did so well, and it's the single most influential stock for technology. they expect the next iphone to be the biggest consumer product launch of 2012. lots of optimism there. homism pro. retailer least reported a stronger than expected start to the year earning two cents ahead of estimates, but sales weakened as spring approached.
that concern had shares of least weakening down more than 10%. after it cut its earnings forecast due to costs from an employee buyout program. cooper industries has been bought for $12 billion in cash and stock by eaton, the stock jumped, and eaton fell a fraction. all the actively exchange traded funds coming in with nice gains. the emerging markets, nasdaq 100 and russell 2,000 fund up by at least 2% each. that is tonight's market focus.
>> tom: some of the nation's biggest cable companies are teaming up to give their customers more access to wireless hot spots across the country. cable vision, comcast, cox communications and time warner are banding together to form the cable wi-fi network. it should be up and runing in the next few months. with more people watching sloo on the go from mobile devices, they say the wi-fi network will help them compete with cell phone and satellite companies. turns out at least today facebook is not worth $100 billion. that was one of the results of the stock trading below its offering price here today on day two as a publicly traded company. that brings us to tonight's word on the street. disappointment. lindsey bell is an investment analyst at the street.com. certainly initial shareholders have to be disappoint bid the share price, but is it fair to call the initial public offering of facebook a disappointment overall?
>> well, certainly it's going to depend on the perspective that you're looking at. i would say that if you, you should first look at the perspective of facebook and the selling shareholders, they're the ones that hired morgan stanley and the other banks to sell the site's ipo, help them raise money, help them create a little more lick quidity, and they raised $16 billion, it's the third largest ipo in a while. and i think that's the sign of success. but like you said -- >> tom: the investment bankers accurately had an assessment of supply and demand so, you didn't see a first big day pop. so in terms of insider selling, they didn't leave any money on the table. >> no, they didn't leave any money on the table certainly you saw that the stock closed on friday at 38.23, but i would say just be careful with that because the stock did trade down during the day and there was a lot of supply from what i've heard. i've heard that there were a number of people that got more shares than they expected to get. so morgan stanley was actually in there at the end of the day
buying tons of shares, just to make sure that the stock really ended the day right above that 38 mark. >> tom: that was not the case today. aren't the big lose terse favorite brokerage clients that were able to secure it, not tin seeders, but the favored ipo buyers? >> you're exactly right, because they got in at 38 and today the stock is down and they had trouble selling out of it. you always go in expecting you're going to see a nice pop on the first day. but we didn't really get that. and then today the market really showed us what the natural price is for the stock, it closed the day at t other losers we've seen here, zynga, a game maker that does a lot of business on facebook, the share price continues to sink to post ipo lows it had in december last year. >> yes, zynga have struggled, they get 90% of their revenue from facebook.
and it's interesting that they've sunk so much on this ipo, because we haven't gotten any new fund meant news out of facebook and sdinga is trying to devers fi their business. >> tom: do you own zynga or facebook? >> i do not. >> tom: lindsey bell, with us from thestreet.com. this year thousands of military men and women will end their service to our country and begin the search for civilian jobs. the hunt for work can be a new challenge, and all this week we're going to be looking at veterans returning to the american economy. suzanne pratt kicks off our special series tonight with a look at veterans on wall street. >> reporter: this was chris perkins eight years ago in iraq. an artillery officer in the u.s. marine corps. this is perkins today, at work on a citi trading floor in manhattan where he oversees a team that provides safe guards for the derivatives industry.
for perkins joining the ranks on wall street after the military was relatively seamless. his first job was at lehman brothers. >> was one of the earlier combat veterans they had seen, and the one thing about wall street is that it's very patriotic in nature, i was welcomed with open arms at every firm i interviewed with, people had time. >> reporter: unfortunately many other veterans find navigating the civilian job market more difficult. the unemployment rate for 18 to 24-year-old vets is currently 18.6%. that's much higher than the rate for all people in that age group. sherril curtis helped soldiers transition from military jobs to civilian jobs. >> they're lacking on the back end when they come out, that intensive type of targeted focus on just job search. career, what's my selected choice, and the job search. i have been speaking for years about boot camp on the way in,
boot camp on the way out. >> reporter: for that reason, citi, credit suisse, deutsch bank, goldman sachs, and bank of america came together a few years ago to form veterans on wall street, the banks work to mentor and hire former military men and women for jobs in financial services. perkins says vets are a natural fit for wall street. >> when we're doing this hiring it's not about charity work, it's good business. beuse veterans do bring with them wonderful qualities. >> reporter: investment banker john toronto echos those sentiments. toronto is a former marine platoon commander. although his tour of duty was during more peaceful times in former yugoslavia. he says many soldiers are generally good leaders, inclined towards team work and have integrity and maturity. >> when you're in the military you are faced with situations where you have to make good, quick practical decisions with less than perfect information, often in very chaotic
environments, and those skills translate pretty well to wall street. >> reporter: it's impossible to say exactly how many veterans are currently employed in financial services, that's because they're not required to put military duty on their resume. but it's clear there will be a lot more vets on wall street in t future. suzanne pratt, nbr, new york. >> tom: we continue our look at veterans in hiring tomorrow here on nbr, be sure to join us, we'll introduce you to former soldier josh, he escaped a road side bomb in baghdad that took his west friend's life. we'll tell you his story tomorrow. with the euro zone's debt crisis still churning, investors of all sizes are looking with concern and curiosity toward europe. concern about the risk posed by europe, curiosity about investment opportunities. here's jerry webman, chief economist at open ebb i'mer funds, and author of -- oppenheimer. >> europe's financial problems are flairing up again and
markets have been singed. blaming the government, big billings or foreign countries is not an investment strategy. a successful strategy means figuring out where economic value is being created and then identifying the opportunity that result around the globe. should all our investments be stamped made in the u.s.a.? can japan's rapid aging create opportunities as well as problems? are we flying brazilian commercial jets or wearing malaysian dress shirts, but, why do we find some of the world's strongest countrys in troubled european countries? investors also must never forget our single most valuable as set, our own human capital and how we can develop it to enhance our financial well-being. as i explain in "money shift," the world is always changing and you have two options, rail against it or get to work making the most of the opportunity that change brings. to put it simply, there is money to be made in what you can't change about the world's
economy. i'm jerry webman. >> tom: got your bags packed, the summer travel season kicks off this weekend with memorial day. looks like more people will be taking trips over the summer months. the recent drop in gas prices and an improvement in job security of americans in the mood to travel again. that means more people driving and yes flying. already there's been an expected bump in business leading to a bump in hiring. the travel and leisure industry added 100,000 more workers this march than it did one year ago. and in fact with gas prices continuing to fall, job experts see more hiring for the travel industry on the horizon. we'll get you that memorial day throughout this week. that's it for us tonight on this monday. we'll see you online at nbr.com and right back here tomorrow night.